Manufacturing Fallacy

Just in case you hear phrases like, “America no longer makes things,” “…decline of American manufacturing,” or “China is now the world’s factory,” here are the facts…

Don Boudreaux points out that the latest official statistics from 2007 show that US manufacturing output that year was 8% higher than in 2000, 69% higher than in 1990, and 184% higher than in 1980 (all adjusted for inflation).

Moreover, if you look at the value added in the manufacturing chain, the US leads the world by a healthy margin. In fact, as you can see, the US produced about twice as much manufacturing value added as China in 2005.

Of course, if China keeps growing at their current rate, they will pass the US sometime around 2017. But that’s good because it means they’ll have created a ton of wealth.

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10 Responses

Kevin is right. US manufacturing is incredibly productive and good. It has to be to survive, since US manufacturing workers make 20 times or more what workers in developing countries do. The reason we have been losing manufacturing jobs isn’t that we aren’t good at it. It’s that there are so many high-value-creation job opportunities for US workers in the service sector. If a US worker can earn $20 per hour working a service-sector job, then manufacturers in the US have to match that wage or they won’t get workers. It’s competition in the labor market from the service sector that’s causing manufacturing jobs to go overseas

Wait just a darn a minute. We have the same undergraduate degree in Quantitative Economics. I started taking classes for it when I was… 19. So Rafe is the odd man out here. Though you are still the three man 🙂

And don’t try and play the graduate degree card. Remember, I have an MS in Engineering-ECONOMIC Systems. Of course, there’s always the PhD card. But that would just be admitting you’re the only masochist among us 🙂

Oh please. I told you back then that you’d have to be interdisciplinary to make any progress in econ and not just drill down into mathematical minutia and models that don’t have any connection with reality. Happy to say we are all economists these days if you admit that what was called econ back then was witchcraft.

Oh, and as for our identity crisis, I think I’ll have to invoke a type hierarchy. An economy is a subtype of complex adaptive system. Rafe and I just operate at a higher level of abstraction. More folds in the old cerebral cortex, you see. (Now that’s pan disciplinary BS for you, computer science and neurobiology applied to economics and complex systems)